New report from the GAO flags problems with the IRS whistleblower program

The Government Accountability Office (GAO) says that the revamped Internal Revenue Service (IRS) whistleblower program isn't doing its job. The program rewards people who turn in tax cheats in cases involving fraud of $2 million or more.

According to a new report from the GAO released on September 9, 2011, the IRS needs to improve its performance. In particular, the GAO cited the IRS' inability to manage claims in an efficient and timely manner. More than 1,300 whistleblower claims have been filed since 2007, with allegations of fraud levied against 9,540 taxpayers. The IRS is still investigating 8,254 of those taxpayers (86.5 percent).

The long-standing whistleblower program was upgraded in 2007 to encourage more tipsters to come forward. Here are some of the key changes:

If the IRS proceeds with any administrative or judicial action based on information provided by an informant, the informant must be rewarded based on the amount collected. This reduces the discretionary authority of the IRS.

A whistleblower award must equal at least 15 percent, but no more than 30 percent, of the amount collected in the investigation.

A prior prohibition against including interest amounts when calculating the size of the reward was eliminated.

In its report, the GAO provided eight recommendations that may help alleviate the current problems, including redesigning the whistleblower form, revising procedures for tracking claims, and setting target dates for completing investigations.

For its part, the IRS said it "generally agrees" with the recommendations; however, IRS Deputy Commissioner Steven Miller noted that the agency must observe legalities relating to protection of privacy and due process, which can extend the time needed for investigations.